Financing with KfW or without? Price surcharge from KfW70 to KfW40?

Hello everyone,

I have the following project planned:

I want to sell my house through a real estate agent and expect a selling price of €280,000. The agent will get their 3.57% from that, which is around €10,000. There are still about €180,000 of debt registered on the house, which I will have to pay off due to prepayment. In the end, around €75,000 remains – from this money I would buy a fully developed plot of land of 550m² (building gap), which would cost me roughly exactly this €75,000 including land transfer tax and notary fees.

The plot would basically be my equity, plus about €25,000 from a building savings contract. So a total of around €100,000 equity.

On the plot, I want to build a 2.5-story house, in which my parents are supposed to live on the ground floor (~80-100m², rent-free), on the upper floor my living area plus study, and in the attic the bedrooms plus bathroom. The larger apartment would be estimated at about 160m². We are initially planning without a basement, depending on the price that could change.

We have asked a prefab house company to give us an offer. The "turnkey" costs came out to €340,000. Without floor coverings, without wallpaper and ceilings. Without outdoor facilities. If I then calculate about €50,000 (~15%) additional construction costs, €20,000 for outdoor facilities, and €20,000 for floor coverings and wallpaper, plus another €30,000 miscellaneous, I come to €450,000.

An architect-designed house would probably be a bit more expensive, but the architect said we would get roughly to that figure as well.

The equity ratio for the entire project (plot + new build = €525,000) is thus (95,000€) just under 20% and should be reasonably well received by banks.

The monthly burden is manageable and is about 30% if I look at the current interest rates etc. I do not want to go into that in detail, because my core problem is actually the decision for or against KfW...

The architect advises against it. He says to get one euro of funding, you would have to invest four euros. That would mean that if I built KfW40 and thus took out a €200,000 KfW loan, I would get a €20,000 repayment subsidy – but would have to invest about €80,000 more? That sounds unrealistic...

How high is the surcharge from KfW70 to KfW40 in the above-mentioned constellation? Can that be quantified? Or approximately narrowed down?

Does KfW always have to be in first rank? Or is it like this (it was claimed) that the house bank then only finances 60% loan-to-value and holds first rank (and thus offers very good interest rates), and KfW with its conditions then goes into the subordinated rank, and you can then finance everything above 60% of the loan-to-value at an unbeatable interest rate of under 2% over 20 years?

Currently, I could afford around €1,500 per month, and we will probably benefit from the announced Baukindergeld (child construction grant) for 3 children, which would correspond to a €3,600 subsidy over 10 years.

Ignoring special repayments, the €430,000 would therefore be feasible in 30 years at an interest rate of about 2.5%. Being a year longer does not matter. Special repayments are certainly possible but are not included here.

With the KfW subsidy and an assumed interest rate of around 2% for the first 20 years, that is quite realistic…

Or is this a naive calculation because I am not considering some aspects?

Further information gladly upon request, otherwise I look forward to your opinions and thoughts.

Above all, I am interested in whether KfW really does not pay off (then please with an explanation), or whether the architect is simply too lazy to broaden his horizons in order to build in a way that is sensible and economical…

Many thanks and best regards,
Xor

Do I understand you correctly that you want to build a 260sqm house for 350k plus additional construction costs?

Well, the standard Energy Saving Ordinance doesn’t have any particularly unusual requirements, but I don’t believe for a second that it can be realized turnkey as described.

And to talk about KFW55 or 40, where your problem lies: He is right that it probably won’t be worth it today and the investments will be significantly higher (whether 20, 40 or 60 is realistic, I can’t assess). But you do save a considerable amount of energy, have a house that should still be competitive in 10 years, and do something for the environment. Whether it’s worth it to you, you have to decide yourself.

Financially, the jump from the energy saving ordinance to KFW55/40 will not be worthwhile. Your heating costs are too low for savings in the single to double-digit percentage range to pay off within your lifetime. Whether it is more ecological is debatable on many points. If you want to do it on principle, go ahead. But then you need to increase your budget...

The offer states a turnkey house (160m²) with a granny flat (~80m²) for €340,000 without floor coverings and without wall coverings, no ceilings. Bathrooms tiled up to a height of 1.60m, no basement, no garages, no exterior facilities.

I am less concerned about the costs. I will discuss those with the architect in advance, obtain offers, etc.

My general question is whether I gain any advantage by planning and building with KfW40.

It is clear that it becomes more expensive due to "better" materials. The question is how much better it gets and whether it is worthwhile overall. Not in the sense that I want to "save" €10,000 somewhere because the repayment subsidies are better. But of course also regarding resale value, energy savings, etc.

If you consider that today you might save €150 per year on energy, but in 20 years it will be €500 per year, that is also an aspect I don’t want to overlook. And in 20 years, in my opinion, we will have these energy costs, or rather the saving potential will be there.

And a core question remains whether a KfW loan could possibly significantly reduce the interest on the remaining loan from the house bank because this would then only assume a loan-to-value ratio of 60%, as the KfW loan can be considered equity from the house bank’s perspective... But this only works if KfW is issued as a subordinated loan...

Since the KFW loans (energy efficiency) are applied for jointly through the house bank and are usually considered equally in the securities, it does not reduce the interest rate at most banks.

Since my crystal ball is broken, I can’t tell you how much money will be saved in 20 years through better construction.

In the last 20 years, the electricity price has risen by 50%. From the mentioned 150 euros, in a scenario with a similar increase, it would probably become about 225 euros. And whether that is worth it then because of 900 euros p.a.... But as I said, crystal ball and all.

We achieved KFW55 with little effort, but deep geothermal energy was set for us from the start. A gas boiler (with solar) simply costs less.

With a general contractor, it probably does not make sense to choose KfW. They often demand huge sums, as they are aware of the subsidies.

With an architect and individual contracts, it can be worthwhile. There are good opportunities for negotiation. And also for own work.

I also recommend consulting an energy advisor in advance. [Einliegerwohnung] can sometimes mean double funding and be interesting.